America's #1 Seller of Mortgage Protection Insurance

Many people think earning money is the only step to profitability, but there are pitfalls you might face as an agent if you only focus on dollar signs. We’ve consulted with the pros of proven profitability (try to say that three times fast) and here’s the advice they gave us:

Profitability Pitfall #1 - Pacing

If you’re a new agent, you’re probably excited and ready to hit the ground running. That sort of enthusiasm will take you far, but it may also trip you up. When you’re just starting out, it’s important to realize that there will be financial and logistical limitations. Think of yourself like a great runner or race horse; if you sprint forward in the first few seconds of the race, you’ll run out of steam before you hit the finish line.

Consider this scenario: Your upline manager gives you 100 leads to work with. Once you sign contracts with these clients, you may be tempted to buy 100 leads yourself. Remember, though, your manager is working from a reserve of funds s/he has built up over time. Buy that many leads yourself and you may turn upside down if you break your stride.

Obviously, proper pacing is paramount to profitability (another tongue-twister). If you feel like you’re going too fast, here are three ways to slow down and regain control.

1. Start on the Right Foot. You might think that the interview process is only for you, but check out your upline manager before being hired and find out what type of leader s/he is. If they expect you to buy a large amount of leads on your own or sell a massive amount in your first week, ask yourself honestly if you think you can do it.
2. Talk to your Upline Manager. If you’re feeling overwhelmed with leads or a certain quota goal, be honest and see if the two of you can come up with a strategy to help you achieve it together.
3. Work with What You Have. Instead of buying out expensive leads, use referrals from leads you’ve already bought. Phillip Hudgins proves that this method is a great way to get more bang for your buck.

Profitability Pitfall #2 - Chargebacks

Here’s a nasty not-so-secret about the insurance business. There are two types of commissions; advanced and as-earned. Advanced commissions will deliver all or most of your commission in one lump sum, while as-earned commissions are allotted to you in smaller increments monthly.

I know what you’re thinking: Lump sum sounds great! With all that money in the bank right away, you could buy whatever you wanted! A new car, a flat-panel TV, an iPhone… you worked hard; you deserve a luxury or two.

Then, your client decides to cancel his contract or let his policy lapse, and the money advanced to you is suddenly not there. You have to repay the amount not gathered from the original contract with money you’ve already spent!

Many times you’re hanging on by an advanced commission for almost the entirety of a client’s policy before it’s transferred to an as-earned commission. You can easily be lulled into a false sense of security 5 or even 6 months into a policy, but even this far in, a canceled contract could result in the financial rug being pulled out from underneath you!

This is called a “chargeback,” and is why as-earned commissions are safer profit-wise. If you do have an advanced commission set-up, it’s best to hold on to your advanced money until the contract clears with your client, or treat it as if it was an as-earned commission. This will prevent you from spending more than you actually have in the bank.

But what if you just can’t hold on to all that money? It’s true that in order to make money, you have to spend money. In that case, budget your commission money well. This goes hand-in-hand with pacing; know where your money is going and how much of it is being spent. We recommend setting aside around 20% of your commissions in your “in case of chargebacks, break glass” file in the untimely event that a contract falls through.

At NAA, enthusiasm and tenacity are great skills that will take you a long way. However, in order to maintain, you have to pace your sales as well as your commissions. You can grow too fast and fall hard if you don’t keep your eyes on your funds and portion out your profits. A seed can’t grow into a tree in one day, but persistence and prudence will take you far.